When is
coming out of a recessionpotentially a bad thing? When
you're in the business of saving your customers money. As
customers loosen their purse strings a little, they may be
less interested in your services.
So far though, pharmacy benefits manager
Medco Health Solutions (NYSE: MHS) seems to
be doing pretty well, and the future is looking pretty
healthy, too.
In the third quarter, earnings, excluding charges related
to its spinoff from
Merck (NYSE: MRK) six years ago, were up 19%
year over year. Revenue was up only 17.8%, but more trickled
to the bottom line because Medco made more from each
prescription as members increased their usage of generic
drugs, from which Medco gets a higher margin.
The only place where Medco seems to have slipped a little
in the quarter was in its mail-order business, where volume
was down 2.3%. It would be better to see the company capture
all the revenue from a prescription rather than split it with
retail pharmacies run by
Walgreen (NYSE: WAG),
Wal-Mart (NYSE: WMT), or, worse, rival
CVS Caremark (NYSE: CVS). The good news is
that the decrease was entirely because of members filling
fewer prescriptions for high-priced brand-name drugs -- the
recession strikes again; mail-order prescriptions for generic
drugs were up 1.4%.
Next year looks just as good for Medco. As rival
Express Scripts (Nasdaq: ESRX) prepares to
grow through an
acquisitionof
WellPoint 's (NYSE: WLP) pharmaceutical
business management division, NextRx, Medco is growing the
old-fashioned way. The company has kept 99% of its customers
for next year while signing up $4 billion worth of new
business.
The new business may be a forecast of how companies think
we'll have a slow recovery, but it could be good for
investors because pharmacy benefits managers can help those
companies lower their expenses. In either case, it's great
news for Medco and its investors.
This article was originally published as
This One Is Thriving in a Recessionon
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